Importance of Food Cost

Why do people open and run businesses? There are various reasons but, generally, it is to make a profit and be able to earn a living.

Look at this scenario, a chef makes a dish for $34.00 and sells it for $40.00. They are making $6 on each dish sold. Consider that from this $6, staff salaries, rent, heat, lights, water, and many other operating costs need to be paid.

This is one of the most important aspects of business (and greatest challenges) for an operator – understanding a breakdown of their costs so that it doesn’t end up costing the owner to run the business.

The most common reason for an operator not being successful is because they are not managing their costs and eventually their costs to run their operation exceed their revenue.

By managing food cost (also known as cost of sales) an operator can maintain a desired level of costs for food and not let it bite into the profit they require.

Reflection: If you own or have considered owning your own restaurant, what are some of the costs that you would have? What would happen if the costs are higher than your sales? What actions would you take?

Leave your thoughts in the comments section below.